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Today in the Market (7/13/2022)

Good Evening. Wednesday saw a decline in U.S. stocks for the third straight session as investors evaluated June’s inflation data, which was higher than anticipated.

The Dow Jones lost 0.67%, and the S&P 500 fell 0.45%. The Nasdaq was an outlier for much of the morning, trading in the green as technology companies recovered, but it ended the day down 0.15%.

NOW BOARDING MISSED EARNINGS

Even with the strong demand for summer travel, Delta Air Lines (DAL) second-quarter results fell short of forecasts. According to Bloomberg’s compilation of consensus estimates, here is how Delta fared in the second quarter:

  • Revenue: $12.31 billion vs. $12.33 billion expected
  • Earnings Per Share: $1.44 vs. $1.64 expected

According to Delta CEO Ed Bastian, the airline is seeing a “massive surge in air travel this past quarter” that “continues to grow.” He goes on to say that “the reliability is back,” with flights in July achieving a 99.20% completion rate so far, following flight cancellations and delays in June that caused chaos in airports and prompted Delta to provide free rebooking during the Fourth of July holiday.

However, despite what one might expect, airlines are not having trouble only due to the rise in petroleum costs. Excessive fuel-related costs are only one aspect of overall rising expenditures that are placing pressure on margins. These prices have mainly been passed along to travelers. Non-fuel unit costs were 22% higher than in June 2019, according to Delta Air Lines.

COMING TO A STREAMING SERVICE NEAR YOU

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Don’t be surprised, we told you about this in our blog on 6/8/22.  Later this year, the industry leader in streaming (Netflix) will collaborate with Microsoft (MSFT) to launch its new ad-supported service. The tech behemoth will work as the streamer’s technical and sales partner. Its advertising revenue last year was $10 billion.

In a blog post, Netflix COO Greg Peters stated that “Microsoft has the proven ability to support all our advertising needs as we work together to build a new ad-supported offering.”

Customers of all income levels would switch to a discounted ad-based alternative, according to recent data from Bank of America, but “ad-tiering could serve as a way for consumers across all income brackets to extend their streaming budget by trading down to subscribe to an additional service, benefiting Netflix’s competitors much more than Netflix itself.”

However, as the platform struggles with a post-COVID decline in subscribers, the ad-supported tier could assist increase income when combined with a crackdown on password sharing.

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